As a consequence of the pivot of the European Central Bank (ECB) on its monetary policy, Trade Republic will remunerate the deposits of its users. This morning, the fintech specializing in stock market investment (which has also launched into crypto-currencies) passed on the rise in interest rates in a timing that allows it to (temporarily) differentiate itself from its competitors. The first targeted: Revolut. The neo-bank which also offers stock market investment solutions like Trade Republic does not remunerate the capital of its customers.
We haven’t finished hearing these kinds of announcements: yesterday, it was the neo-bank Bunq which celebrated its new rate a little early. It thus went from 1.05 to 1.31%. At Trade Republic, it will be 2%, with a deposit limit of 50,000 euros (100,000 euros at Bunq). According to the terms of the German platform, the rate will be calculated on the basis of the amount of the account each day and the interest will be paid each month. All clients are affected, whether their money is invested or not.
In one year, the ECB rate has gone from minus 0.5% to 2% today. In February 2023, it should be further raised by 50 basis points.
Fight against inflation
The increase in interest rates on deposits is perhaps the only advantage of the new monetary policy for customers, along with that of the fight against inflation. Otherwise, it will also result in a tightening of credit and more expensive loans for real estate, for example. On the side of companies such as startups, the situation is also a brake on investment. On the stock market, most technology stocks have seen their prices collapse, partly for this reason. A trend that must have been felt by investors on Trade Republic as on other platforms.
So the strategy is smart on the part of Trade Republic. There has necessarily been a slowdown in the number of transactions (billed 1 euro commission on the platform) and to be able to welcome new customers, the remuneration of their deposit can be effective. Especially if the competition does not follow. On the other hand, if one relates to inflation, the remuneration of Trade Republic makes all the same lose in purchasing power. But there is now no difference between the platform and a livret A at a bank because both charge the same annual interest rate (until February 2023).
© Trade Republic
In addition, the neo-broker intends to rely on the same partner as Revolut to offer crypto-currencies. The arrival of 52 different currencies last month should also support the Trade Republic model, based on the need for customers to remain active and carry out transactions (purchase or sale). Private, the company reserves confidentiality on its financial health. Invested in 17 countries, it has not announced that it is profitable and raised, last summer, the trifle of 250 million euros.
